structural unemployment research paper

Cyclical Unemployment, Structural Unemployment

Whenever unemployment stays high for an extended period, it is common to see analyses, statements, and rebuttals about the extent to which the high unemployment is structural, not cyclical. This essay views the Beveridge Curve pattern of unemployment and vacancy rates and the related matching function as proxies for the functioning of the labor market and explores issues in that proxy relationship that complicate such analyses. Also discussed is the concept of mismatch.

This paper was presented as the Mundell-Fleming Lecture at the Thirteenth Jacques Polak Annual Research Conference at the International Monetary Fund in Washington, D. C., held November 8-9, 2012. The author thanks Gadi Barlevy, Olivier Blanchard, Steven Davis, John Haltiwanger, Bart Hobijn, Marianna Kudlyak, Giuseppe Moscarini, Peter Orszag, Jim Poterba, Sarah Bloom Raskin, Robert Triest, Rob Valletta, and participants for their comments, as well as James Fogel and Caroline Shinkle for research assistance. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.

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• DOI: 10.1162/003465399767923872
• Corpus ID: 55553213

Structural Unemployment, Cyclical Unemployment, and Income Inequality

• Published in Review of Economics and… 1 February 1999

185 Citations

Revisiting macroeconomic activity and income distribution in the usa.

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On the Positive Correlation between Income Inequality and Unemployment

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Structural Unemployment, Underemployment, and Secular Stagnation

ISER DP No. 1088RRR

55 Pages Posted: 10 Jun 2020 Last revised: 31 Jan 2023

Ken-Ichi Hashimoto

Kobe University - Faculty of Economics

Yoshiyasu Ono

Osaka University - Institute of Social and Economic Research (ISER)

Matthias Schlegl

Sophia University - Faculty of Economics; Institute of Social and Economic Research, Osaka University

Date Written: January 31, 2023

In this paper, we show that underemployment and not necessarily high unemployment becomes the main measure of economic slack in the labor market under secular stagnation. Specifically, involuntary underemployment in the form of a persistent shortfall of working hours occurs in the search and matching model, provided that households derive utility from holding wealth, and quickly dominates the total employment gap under stagnation. Conventional policy measures aimed at reducing unemployment may increase the labor market gap through their effects on underemployment and should be used with caution. In contrast, positive demand shocks improve unemployment and working hours, while increases in potential output worsen both ("paradox of toil"). Our analysis provides new insights into empirical puzzles such as Japan's seemingly decent employment record during its lost decades.

Keywords: Secular stagnation, underemployment, unemployment, labor market frictions, search and matching

JEL Classification: E24, E31, E44, J20, J64

Suggested Citation: Suggested Citation

Kobe University - Faculty of Economics ( email )

2-1, Rokkodai Nada-Ku Kobe, Hyogo, 657-8501 Japan +81 78 803 6839 (Phone)

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka Ibaraki, Osaka 567-0047 Japan

Matthias Schlegl (Contact Author)

Sophia university - faculty of economics ( email ).

Tokyo, 102 Japan

Institute of Social and Economic Research, Osaka University ( email )

6-1 Mihogaoka Ibaraki Osaka 567-0047 Japan

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